Karachi Stock Exchange (G) Limited

Welcome
To The
Presentation
On
KSE
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 Karachi Stock Exchange (G) Limited

The Premier Stock Exchange of the Country

• Established in September 18, 1947

- Incorporated as Company Limited by Guarantee

• Initially 5 companies with a paid-up capital of Rs.37

million

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 KARACHI STOCK EXCHANGE

• Membership of KSE is presently fixed at 200 as per Articles

• Prospective members have to purchase a seat from the existing

members

• The price of the membership seat is freely negotiable between the

buyers and sellers

• Since June 1990, membership is open to corporate entities. Presently

there are 156 corporate members of whom 10 are listed companies

• Foreign investors are allowed to hold up to 100 percent shareholding

in corporate brokerage houses

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Company Limited by Guarantee ?

• A Company Limited by Guarantee has the following significant features:

• Company is without share capital
• Number of members is fixed by the articles
• Membership is transferable subject to the membership criteria as laid
down by the Board
• Surplus funds are not distributable to the members in any manner
• The funds are used only for the purpose of promoting the objectives of
the company

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 MANAGEMENT AFTER RESTRUCTURING in 2003

Board of Directors
• Consist of 10 Members
• 5 elected member directors
• 4 Non Member Directors are appointed by SECP
• MD is ex-officio member of the Board

Chairman of the Board

• Elected by the Board out of the Non-Member Directors

Management of the Exchange

• As per Article, MD is responsible for the operational &
administrative matters of the Exchange

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 KSE – Key Facts

Number of companies 655

Listed Capital US$ in billion 8.77

Market Capitalization US$ in billion 50.55

KSE 100 Index 11296.62

Average Daily Turnover (T+3) Shares in million 219.32

Average Value Daily Turnover (T+3) US$ in Million 391.62

Average Daily Turnover (Future) Shares in million 70.28

Average Daily Turnover (Future) US$ in Million 174.78

As of March 21, 2007

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 KSE – Indices
Presently three indices are maintained:

• KSE 100 Index

KSE 100 is widely reported and has representation of all sectors listed on the exchange. It
is a capital-weighted index and consists of 100 companies representing about 88% of total
market capitalization of the Exchange.

• KSE 30 In line with the international best practices recently KSE introduced, KSE-30
Index using the “Free-Float Market Capitalization” methodology and is live from
September 1, 2006. In addition to other criteria the companies included which have
minimum free-float shares of 5% of the total outstanding shares and securities traded for
75% of the total trading days. The scrip should be in the top companies, ranked on the
basis of liquidity i.e., trade value of shares.

• KSE All Share Index : It is a capital-weighted index and consists of all companies.
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 KSE – Key Facts
• Automation Started

• In September 1997 with Computer Based Trading started in Selective Scrip

under KATS
• In May 1998, Open-Out-Cry System was Completely Abolished
- For Fair, Transparent, Efficient & Cost-Effective Trading
• By 1999 & 2000, Trading System & Servers were Upgraded

• In-house Developed Trading System

• In 2002, Implemented Home Grown TS

• Capability of Executing 500,000 Trades a Day
• Peaks Of 1,000,000 Trades Sustainable For 10-15 Minutes
• 2000 Plus TWS

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 KSE – Key Facts
Average Daily Trade

160000
134,470
140000 124,345
120000
100000 84,271
80000 71,503

60000
40,639
40000 24862
20000
0
2001 2002 2003 2004 2005 2006

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 KSE – Key Facts

Average Daily Turnover T+3 & Future

Avg. Daily Turnover T+3 Avg. Daily Turnover Future

400 366
344
350
309
300 262
250
200 171
150 117
97
100 70 83
54
50 35
15
0
2001 2002 2003 2004 2005 2006

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 KSE – A Modern Electronic Exchange

• Fully automated trading, clearing and settlement system.

• KATS (Karachi Automated Trading System) can handle over 500,000
trades daily
• Internet-routed trading facility

• Market information available on a real-time basis nationally as well as

internationally via satellite

• Investors and fund managers can also access information through

(Display Only Terminal).

• Few T.V channels also display KSE ticker. Live display boards are
also available at major places like Airport.

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 KSE – Key Facts

• Foreign investors are at par with local investors; 100% foreign shareholding
is allowed

• No permission required for setting up of any industry except alcohol, arms

and ammunition

• Free repatriation of profits and principal

• No capital gains tax on purchase and sale of listed securities up to 2008

• Dividend is taxed as a separate block of income @ 10%

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 Visitors / Investors

• Around 4000-5000 people visit the Exchange for trading purposes

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 Legal Framework

The Regulator:

• Securities and Exchange Commission of Pakistan

(SECP) - regulatory body for the securities market.
Setup in pursuance of the SECP Act 1997

• The Act provides administrative authority,

operational and financial autonomy in carrying out
regulatory and statutory responsibilities and at the
same time an accountability mechanism through its
Policy Board

• The Policy Board is answerable to the Parliament

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 KSE’s
Performance
is Attributable to:

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Market Development and Operational Efficiency

• Appropriate regulatory framework and enforcement (protection of

minority shareholders)

• Efficient Clearing & Settlement system (NCCPL)

• Availability of live market data and instant disclosure of

information in general

• Electronic settlement of deliveries (CDC)

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 KSE’s Performance is Attributable to
(cont.):
Corporate Reforms

• Code of Corporate Governance

• Timely holding of AGMs

• Responsibilities of Directors enhanced

• Quality audits

• Quarterly financial results

• Enhanced disclosure requirements

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 KSE’s Performance is Attributable to
(cont.):
Capital Market Reforms & Initiatives

• Implementation Of T+3 Settlement System Since September 2001

• Trades executed on a trading day are to be Settled on third day
• Else it either goes to settlement Delivery Vs Payment (DVP)
• Or is to be financed under CFS

• Risk Management
• Introduction of Client Level Netting from March 5, 2007
• New VaR based Margin regime implemented from Dec-04, 2006
• UIN Registration
• Capital Adequacy
• Pre-Trade Verification
• Exposure Monitoring
• Market Surveillance & Control
• Circuit Breakers
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 Listed Companies Performance
2001 2002 2003 2004 2005 %
INC.
Paid-up Cap. 226 277 300 375 473 109
(Rs. Billion)
Sales 1112 1169 1329 1538 1805 62
(Rs. Billion)

Profit Before 62 93 138 227 326 425

Tax
(Rs. Billion)
Taxation 29 36 47 61 93 222
(Rs. Billion)
Profit After Tax 33 57 91 166 233 606
(Rs. Billion)

Dividend 41 57 63 100 140 242

Amount
(Rs. Billion)

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 KSE’s Performance is Attributable to
(cont.):
SECTOR-WISE DIVIDEND YIELD – 5% & above

SECTORS DIVIDEND YIELD 2005

Close End Mutual Fund 13.96
Investment Banks & Sec. Companies 11.59
Leasing Companies 9.24
Fertilizer 8.60
Modarbas 7.94
Power Generation 6.74
Engineering 6.53
Tobacco 6.15
Cable & Electrical Goods 5.93
Oil & Gas Exploration 5.29
Oil & Gas Marketing 5.22
Automobile Assembler 5.00

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 Best Performing Market of the World

The Karachi Stock Exchange was declared as “The Best

Performing Market of the World” in the year 2002, registering an
increase of 112% in the KSE 100 Index.

In years 2003 and 2004, the Exchange was also amongst the Top
10 Best Performing Markets of the World and the Index increased
by 65% and 39% respectively.

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KSE 100 VS Other World Markets
As On December 31, 2002
EXCHANGE INDEX Increase in %
Points

KSE KSE100 1428.35 112.20

Argentina MerVal 229.56 77.71
Kuwait KSE Index 660.40 38.63
Colombo All Share 194.07 31.25
Bangkok Set 52.63 17.32
Mumbai BSE 30 114.95 3.52
New Zealand NZSX 40 (107.87) (5.25)
Kuala Lumpur Composite (49.77) (7.15)
Australia AORD (384.40) (11.44)
NYSE Dowjones (1679.87) (16.76)
Brazil BVSP (2310.00) (17.01)
Singapore Straits Time (282.57) (17.40)
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KSE 100 VS Other World Markets
As On December 31, 2002

EXCHANGE INDEX Increase in %

Points

China Shanghai Comp. (288.32) (17.52)

Hong Kong Hang Seng (2075.92) (18.21)
Tokyo Nikkei (1963.67) (18.63)
London FTSE (1277.00) (24.48)
Amsterdam AEX General (184.05) (36.32)
Frankfurt Dax (2267.47) (43.94)

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KSE 100 VS Other World Markets
As On December 31, 2005
EXCHANGE INDEX Increase in %
Points
Seoul Composite 483.45 54.0

KSE KSE 100 3338.21 53.7

Mumbai BSE 30 2795.24 42.3
Tokyo Nikkei 4622.67 40.2
Colombo All Share 415.32 27.6
Frankfurt Dax 1152.18 27.1
Amsterdam AEX General 88.70 25.5
Paris CAC 40 894.07 23.4
London FTSE 804.50 16.7
Jakarta Composite 161.75 16.2
Australia AORD 655.70 16.2
Singapore Strait Times 281.20 13.6
New Zealand NZSX 50 306.07 10.0 24
KSE 100 VS Other World Markets
As On December 31, 2005

EXCHANGE INDEX INCREASE IN POINTS %

Bangkok SET 45.63 6.8

Taiwan T.Weighted 408.65 6.7
Hong Kong Hang Seng 646.29 4.5
NYSE NASDAQ 29.88 1.4
Kuala Lumpur Composite -7.64 -0.8

China Shanghai Composite -105.44 -8.3

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KSE 100 VS Other World Markets
As On December 31, 2006

EXCHANGE INDEX Increase in Points %

China Composite 1514.41 130.43

Jakarta Composite 642.88 55.29

Mumbai BSE 30 4388.98 46.7

J ’ Burg All Share 6818.66 37.68

Argentina MerVal 547.15 35.45
Hong Kong Hang Seng 5088.29 34.20
Norway OSLO 125.60 33.34
Brazil BVSP 11018 32.93
Singapore Strait Times 638.49 27.20
Frankfurt Dax 1188.66 21.98
Kaula Lumpur Composite 196.45 21.83
Taiwan T. Weighted 1275.38 19.48
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KSE KSE 100 483.89 5.06
 KSE 100 VS Other World Markets
As On December 31, 2006

EXCHANGE INDEX INCREASE IN POINTS %

Seoul Composite 55.09 3.99

New Zealand NZSX 50 -41.25 -1.22
BangKok Set -33.89 -4.75

Since January 01, 2007 the KSE – 100 Index increased

by 1256 points (13%)

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 Crash & Surge
CFS facility
Implemented

Indo-Pak Improvement in
Tension Indo-Pak
Settlement
Relations Crisis
New Economic Agenda Improving
11,000.00 Economy CVT Levy
10,500.00
10,000.00
9,500.00
9,000.00
8,500.00 Change of
8,000.00
7,500.00
7,000.00
Regime Terrorists Attack
6,500.00
6,000.00 Nuclear in US
5,500.00
5,000.00 Tests (9/11)
4,500.00
4,000.00 S&P Upgrades
3,500.00
3,000.00
2,500.00
Pakistan’s
2,000.00
1,500.00
Rating
1,000.00
500.00
14-Jan-98

26-Jun-98

18-Nov-98

9-Feb-00

4-Jul-00

23-Nov-00

28-Feb-02

1-Mar-05
23-Jul-02

17-Dec-02

20-May-03

30-Jan-04

31-Dec-04

30-Jun-05

15-Mar-06
10-Sep-99

28-Sep-01

18-Sep-03
20-Apr-99

30-Apr-01

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 Crisis, D. Jones Index Average
Declines & Subsequent Performance

EVENT REACTION DATES % LOSS

Exchange closes WW1 22 July 1914 to 24 (10.20)
Dec 1914
German invades France 9 May 1940 to 22 (17.10)
June 1940
Korean War 23 June 1950 to 13 (12.00)
July 1950
Eisenhower heart attack 23 Sep 1955 to 26 (6.50)
Sep 1955
JFK Assassination 21 Nov 1963 to 22 (2.90)
Nov 1963
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 Crisis, D. Jones Index Average
Declines & Subsequent Performance

EVENT REACTION DATES % LOSS

US Bombs Cambodia 29 Apr 1970 to (14.40)
26 May 1970
Arab Oil Embargo 16 Oct 1973 to 5 (18.50)
Dec 1973
Nixon Resigns 7 Aug 1974 to 29 (17.60)
Aug 1974
Financial panic 1987 2 Oct 1987 to 19 (34.20)
Oct 1987

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 Crisis, D. Jones Index Average
Declines & Subsequent Performance

EVENT REACTION DATES % LOSS

Iraq invades Kuwait 2 Aug 1990 to 23 (13.30)
Aug 1990
Asian stock market 7 Oct 1997 to 27 (12.40)
crisis Oct 1997
WTC & Pentagon 11 Sep 2001 to 21 (14.30)
attacks Sep 2001

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Associated Companies

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Associated Companies % of Equity
Central Depository Company of Pakistan 39.81%
CDS is an electronic book entry system to record and transfer securities. It
is the system in which securities do not physically change hands, but are
transferred electronically from one client’s account to another.
KSE investment (As of June 2006) Rs.39.808 Million (7.5023 Million
shares)
Book value Rs.70.22 per share of Rs.10
National Clearing Company of Pakistan Limited 47.06%
As a part of Capital Market Development programme of Asian
Development Bank (ADB) in Pakistan, the Capital Market Project
Consultants (Arthur Anderson & Co.) mandated to develop
recommendations for a National Clearing & Settlement System (NCSS) to
replace the separate and individual Clearing Houses of three Stock
Exchanges i.e. The Karachi Stock Exchange (KSE), Lahore Stock
Exchange (LSE) and Islamabad Stock Exchange (ISE) by a single and
centralized entity.
NCSS is an electronic clearing & settlement system which has been
developed to replace the individual clearing houses of Pakistan’s three
Stock Exchanges by a single entity.
KSE investment (As of June 2006) Rs.30 Million (3 Million shares)
Book value Rs.36.40 per share of Rs.10

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 Investments in Associated Companies

Associated Companies % of Equity

National Commodity Exchange Limited 36.36%
NCEL is a company which provide a centralized and regulated place for
commodity futures to be traded in Pakistan. The exchange will deal in the
trading of commodities such as gold, wheat, rice, sugar, cotton yarn, etc.
Gold will be the first commodity to be traded and trading of other
commodities will follow in phases.
KSE investment up to DEC 2006 Rs.42.09 Million (3.636 Million shares)

JCR VIS Company limited 12.5%

JCR-VIS is a Credit Rating Co. Ltd. approved by Securities & Exchange
Commission of Pakistan and State Bank of Pakistan. JCR-VIS is
operating as a “Full Service” rating agency providing independent rating
services in Pakistan. JCR-VIS is a joint venture between Japan Credit
Rating Agency, Ltd. (JCR), Japan's premier rating agency and Pakistan’s,
Vital Information Services (Pvt.) Limited (VIS)
KSE investment (As of June 2005) Rs.2.5 Million (0.25 Million shares)
Book value Rs.10.89 per share of Rs.10

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KSE’s International Relations

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 KSE’s International Relations
• KSE is a member of:
– FEAS (Federation of European Association Stock Exchange)
– SAFE (South Asia Federation Exchange)

• KSE is an affiliated member of:

– WFSE (World Federation of Stock Exchange)
– IOSCO (International Organization of the Sec. Commission)

• KSE Data Network:

– KSE Index & other data is available on Reuters, Yahoo, Bloomberg,
etc.
– Besides this, various foreign research firms also publishes KSE Data
for e.g. Standard & Poor's, Euro money, World Stock, Derivatives
& Commodity Exchanges, etc.
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Future Challenges

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 Future Challenges
• Strengthening the Risk management
• Investor’s education
• Strengthening of human resources
• Demutualization of KSE
• Improve I.T. infrastructure including setting up of BCP & DRS
• Increase in the Free Float
• New listings through Privatization process
• Promote OTC and TFC Markets
• Development of Derivatives, Options, Index Markets
• Encourage members to open branch offices in all major cities of Pakistan
• Cross Border Listings
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 KSE At a Glance
LISTED CAPITAL MKT CAP KSE 100 INDEX
(Rs. in Billion) (Rs. in Billion)
March 21, 2007 533 3071 11296.62
2006 519 2771 10040.50
2005 470 2,747 9556.61
2004 405 1,723 6218.40
2003 313 951 4471.60
2002 291 595 2701.42
2001 235 296 1273.07

Increase 126% 937% 787%

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Working For
Prosperous
Pakistan

Thank You40